Even if Congress agreed to open the coastal plain of the Arctic National Wildlife Refuge (ANWR) to oil production this year, it would take something on the order of 10 years before oil began to flow through the pipeline - and that's in the absence of serious litigation. That oil would have a modest impact on price, that impact could be offset if OPEC chose to limit production.
These are some of the conclusions from a study conducted by the U.S. Energy Information Administration (EIA) response to a request from Alaska Senator Ted Stevens: Analysis of Crude Oil Production in the Arctic National Wildlife Refuge (May 2008). Marianne Lavelle reports for the U.S. News and World Report: Arctic Drilling Wouldn't Cool High Oil Prices Federal energy analysts say it would take 10 years for production to begin, and its impact could be very modest(May 23). The EIA projected events out to 2030.
If permission to go into ANWR were given today, the EIA estimates it would be 10 years before the oil began to flow. It's interesting to see why:
The assumption that ANWR oil production would begin 10 years after legislation approves the Federal oil and natural gas leasing in the 1002 Area is based on the following 8-to-12 year time line:
• 2 to 3 years to obtain leases, including the development of a U.S. Bureau of Land Management (BLM) leasing program, which includes approval of an Environmental Impact Statement, the collection and analysis of seismic data, and the auction and award of leases.
• 2 to 3 years to drill a single exploratory well. Exploratory wells are slower to drill because geophysical data are collected during drilling, e.g., rock cores and well logs. Typically, Alaska North Slope exploration wells take two full winter seasons to reach the desired depth.
• 1 to 2 years to develop a production development plan and obtain BLM approval for that plan, if a commercial oil reservoir is discovered. Considerably more time could be required if the discovered oil reservoir is very deep, is filled with heavy oil, or is highly faulted. The petroleum company might have to collect more seismic data or drill delineation wells to confirm that the deposit is commercial.
• 3 to 4 years to construct the feeder pipelines; to fabricate oil separation and treatment plants, and transport them up from the lower-48 States to the North Slope by ocean barge; construct drilling pads; drill to depth; and complete the wells.
The 10-year timeline for developing ANWR petroleum resources assumes that there is no protracted legal battle in approving the BLM’s draft Environmental Impact Statement, the BLM’s approval to collect seismic data, or the BLM’s approval of a specific lease-development proposal.
That assumption about litigation strikes me as optimistic.
When the oil begins to flow, the price impacts won't be large. Projected ANWR production would be between 0.4 and 1.2 percent of total world consumption in 2030, depending on the scenario. The biggest price impact will be on low-sulfur crude of from $0.41 per barrel to $1.44 per barrel. Under the mean scenario the price impact would be $0.75 a barrel. The baseline price in the absence of ANWR oil production is about $64 a barrel. The mean scenario gives a price drop of about 1.2%. However, "...the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount."
June 18: Menzie Chinn also posts on this study at Econobrowser today: Drilling Our Way to ... (June 18). Also see the related post here at Arctic Economics: Does it make sense to drill for oil in ANWR? (May 29). The Arctic Economics post covers a working paper by economists Matthew Kotchen and Nicholas Burger ("Should We Drill in the Arctic National Wildlife Refuge? An Economic Perspective," NBER Working Paper 13211, July 2007).
The development of ANWR is an illustration of irresponsibility in America. The majority of public vetoes the idea of drilling, and yet there is still an effort to extract oil from a rare and diverse coastal plain. The US leads the world in contributions to global warming, but is globally far behind in efforts which contribute to preventing it. The Bush Era is over: let's progress. The time has come and gone for America to idle argue irrelevant issues while the earth disintegrates; this goes for many other global issue as well.
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